Top 1 percent top income growth: CBO

The richest 1 percent of America’s citizens nearly tripled their incomes from 1979 to 2007 as the gap between rich and poor — and rich and middle class — grew rapidly, according to a new Congressional Budget Office study.

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The top 1 percent of earners — the Trumps, Bloombergs, and Buffets — saw after-tax, inflation adjusted earnings climb by 275 percent. Among those in the bottom 20 percent of earners, the increase was just 18 percent.

The three-fifths of Americans at the middle of the income scale experienced a growth in income slightly lower than 40 percent.

“The equalizing effect of federal taxes was smaller,” in the 21st Century than three decades earlier, said the CBO, as “the composition of federal revenues shifted away from progressive income taxes to less-progressive payroll taxes.”

The wealthiest Americans were also major beneficiaries of the 1981 Reagan tax cuts, and the 2001 Bush tax reductions.

The nonpartisan budget office did a low key assessment of reasons for the growing income disparity.

“The precise reasons for the rapid growth in income at the top are not well understood,” CBO reported. “Researchers have offered several potential rationales, including technical innovations that have changed the labor market for superstars (such as actors, athletes and musicians), changes in the governance and structure of executive compensation, increases in firms’ size and complexity, and the increasing scale of financial-sector activities.”

As well, a lower percentage government transfer payments — e.g. food stamps, unemployment compensation, Medicare and Social Security — went to lower income Americans.

The bottom 20 percent of earners received 35 percent of transfer payments in 2007, but more than 50 percent in 1979. The reason was higher spending on Medicare and Social Security, benefits that are enjoyed by income earners at all levels.

The top 1 percent of income earners received 17 percent of after-tax household income in 2007, up from 9 percent three decades earlier.

The upper 20 percent of income earners took in 53 percent of after-tax income in 2007, compared to 43 percent in 1979.

Former Bush political guru Karl Rove, in a recent Puget Sound visit, gave a different perspective. He noted that the top 1 percent pay 38 percent of all federal income taxes. He decried President Obama for engaging in “class warfare” with a proposed tax hike on upper income Americans.

The Congressional Budget Office study came on a day that Texas Gov. Rick Perry, a Republican presidential hopeful, came out in favor of a flat tax of 20 percent on all Americans.

The CBO was responding to a bipartisan request. It was requested by Senate Finance Committee Chairman Sen. Max Baucus, a Montana Democrat, and GOP Sen. Charles Grassley of Iowa, ranking Republican on the panel.